Japanese cosmetics maker Shiseido (4911.TY) said it is targeting “double-digit” growth in China this year and will expand into lower-tier cities as developed consumer markets remain subdued and mainland consumer spending power continues to grow. Masahi Kamata, president of China operations, said the country is Shiseido’s most important market and its main driver of growth.
Kamata said Shiseido would “put more energy in the lower-tier cities” marking a significant step towards expanding revenue streams beyond first-tier cities. The move will also provide a platform for its lower-end DQ line, which will be sold in drug stores in inland cities; Shiseido’s higher-end Aupres and Aqua make-up brands will continue to be sold in cosmetic shops and department stores.
Shiseido is following in the footsteps of other cosmetics companies, all of which are seeking to capitalize on growing consumer awareness of skin-care and beauty products in lower-tier cities, itself a result of rising disposable incomes. The likes of P&G and L’Oreal have launched products targeting the high- and low-ends of the market beyond tier-one cities while other significant players such as Mentholatum, Dabao (owned by Johnson & Johnson, JNJ.NYSE) and Kao Corporation (4452.TY) have already succeeded in capturing the lower end of the market.
These strategic moves reflect the importance of lower-tier locations in propping up revenue growth and as well as the intensity of the competition in mass-consumer product lines.